Brazil & Southern Cone - May 2006 (ISSN 1741-4431)

President Tabaré Vázquez is lost for ideas in trying to resolve the acrimonious paper-mill dispute with Argentina. Having threatened to downgrade Uruguay's presence in Mercosur to that of an associate member on 1 May, out of frustration at Argentina's thwarting Uruguay's efforts to put the dispute before the dispute-settlement mechanism in Mercosur, Vázquez expressed resignation on 19 May. He said that there will be no more dialogue with Argentina over the issue as he no longer sees the point. The breakdown in communication means that the long-running row could go to The Hague for international arbitration on 8 and 9 June.

Vázquez is left with little choice but to take a firm line as his approval rating is steadily falling: a little over a year after having taken office, his rating has fallen to 44% according to a survey conducted by Equipos Mori for El Paí­s in May, down eight points on a similar survey carried out in November. His failure to resolve the dispute with Argentina is believed to be the main reason for his waning popularity.

Mercosur: stay put or up sticks?

Vázquez travelled to Washington on 1 May to meet his US counterpart George W Bush. Nelson Fernández, the Canal 10 journalist accompanying Vázquez on his visit to the US, reported that his president had told him he was planning to scale down Uruguay's participation in Mercosur to associate status, such as that of Chile and Bolivia, and that he would be adopting the Chilean model in Uruguay's international economic relations. None of this was captured on camera, however, and Vázquez subsequently strenuously denied suggesting Uruguay was contemplating withdrawing from Mercosur. 

On 4 May Argentina filed its suit against Uruguay at The Hague. It charges Uruguay with repeatedly violating the River Uruguay bilateral protocol signed in 1975, in which both parties committed themselves, among other things, to "preventing the contamination" of the river. The next day Uruguay initiated arbitration procedures within Mercosur, accusing Argentina of undermining the trade bloc by failing to prevent environmentalist protesters from blocking international bridges between the two countries, costing Uruguay US$400m in losses in bilateral trade.

Kirchner wades in

The Argentine government, initially reticent about involving itself in the dispute between Uruguay and the province of Entre Rí­os, then adopted it as "a national cause". On 5 May President Néstor Kirchner made a public appearance in Gualeguaychú, the town at the centre of the protests against Uruguay's construction of the paper mills, accompanied by his entire cabinet, 19 governors and the leaders of Argentina's main trade union, the CGT. 

Kirchner addressed a crowd of some 30,000 people. Although he did not say anything that he has not said before - principally that Uruguay had contravened the River Uruguay protocol - the high-profile public act, attended by the whole of Argentina's political elite, made a very clear political statement. With elections due in 2007 (see page 14) Kirchner will never back down on a "national cause" now. Kirchner told the protesters: "They tell us that Argentina also has plants that pollute_ but they don't say that these are distributed in different locations, and that their joint annual production is only half of what the Fray Bentos paper plants will produce in a single location."

Key players

One man who should be playing a bigger role in breaking the impasse is Carlos Chacho Alvarez, the president of the committee of permanent Mercosur representatives. Alvarez, a former vice-president of Argentina, claims he is speaking to the Uruguayans all the time and that there is a great deal of perplexity about the whole affair. His clear affinity with the Kirchner administration, however, means that he is open to criticism of partiality. 

Alvarez has shown no inclination to play an active role in the dispute: he has not taken Kirchner to task for refusing to give Uruguay recourse to Mercosur's supranational dispute-settlement institution. This raises serious questions not just about his lack of personal motivation to get involved in the damaging dispute but more pertinently about the significance of the position of president of the Mercosur committee if it is not to help resolve disputes of this nature. 

Radical change is on the agenda for Mercosur irrespective of what Uruguay chooses to do. Venezuela's decision to join Mercosur at the expense of the Andean Community will give the bloc a political edge it does not currently possess, while rendering the prospects of a future trade deal with the US very unlikely. On 23 May the Argentine foreign minister, Jorge Taiana, said that Argentina and Brazil hoped that Venezuela would become a full member of Mercosur as soon as possible. The next Mercosur summit will take place in Córdoba, Argentina, in July.